MADRID, Nov 13 (Reuters) - Spanish national consumer prices fell last month for the first time since October 2009, in line with low euro zone inflation that prompted a surprise cut in interest rates by the European Central Bank on Thursday.
The ECB reduced interest rates to a record low of 0.25 percent on forecasts that consumer price rises in the monetary union will be low for a prolonged period.
Euro zone consumer inflation for October is expected to be confirmed at 0.7 percent on Friday, well below the ECB's target of below, but close to, 2 percent.
In Spain, national prices fell 0.1 percent in October, the National Statistics Institute reported on Wednesday, due to a sales tax hike last year, declining wages and price competitition between companies.
European Union-harmonised prices in Spain were flat from a year earlier after rising 0.5 percent in September, while core inflation, which strips out volatile food and energy prices, was 0.2 percent year on year.
'The movement of labour costs and wages are probably the most fundamental driver and we think inflation will remain low into next year. It's not deflation, but it's not an acceleration of price growth,' said Silvio Peruzzo, economist at Nomura.
'It is a combination of labour reform, where wage negotiations have been decentralised in many cases, austerity, which is compressing demand, and a push by the corporate sector to restore competitiveness.'
Spain has been forced to pass wide-reaching spending cuts and tax hikes in the midst of an economic slump since a property bubble burst in 2008 and, with unemployment at 26 percent, is thought to have returned to weak growth in the third quarter.
Economic recovery is being driven by strong exports, which have been boosted by increased competitiveness on the back of lower wages.
(Reporting by Paul Day) Keywords: SPAIN ECONOMY/PRICES
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